Black Bear Value Partners, an investment management firm, published its first quarter 2024 investor letter. A copy of the letter can be downloaded here. Black Bear Value Fund returned -6.7% in June and is up +2.1% YTD and the S&P 500 returned +3.6% in June and +15.3% YTD. HFRI Value Index returned -0.3% in June and +4.3% YTD. The businesses, the firm owns are attractively priced, have solid balance sheets, and are managed effectively. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Black Bear Value Partners highlighted stocks like Builders FirstSource, Inc. (NYSE:BLDR) in the second quarter 2024 investor letter. Based in Irving, Texas, Builders FirstSource, Inc. (NYSE:BLDR) is a building material, manufactured components, and construction services provider. On July 9, 2024, Builders FirstSource, Inc. (NYSE:BLDR) stock closed at $134.30 per share. One-month return of Builders FirstSource, Inc. (NYSE:BLDR) was -11.15%, and its shares lost 3.58% of their value over the last 52 weeks. Builders FirstSource, Inc. (NYSE:BLDR) has a market capitalization of $16.392 billion.
Black Bear Value Partners stated the following regarding Builders FirstSource, Inc. (NYSE:BLDR) in its Q2 2024 investor letter:
“Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 50%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 41% of the stock in the last ~3 years.
While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into low-rate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder.
Normalized free-cash-flow per share looks to be in the range of $13-$16 per year. Margins are structurally higher given their increased shift into value-add products. At quarter end pricing of ~$138 that implies a free-cash-flow yield of 9-12%. which does not reflect the long-term housing needs or their pricing power.”
A crane lifting a truss during the construction of a new building.
Builders FirstSource, Inc. (NYSE:BLDR) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 72 hedge fund portfolios held Builders FirstSource, Inc. (NYSE:BLDR) at the end of the first quarter which was 61 n the previous quarter. Builders FirstSource, Inc. (NYSE:BLDR) achieved incremental sales of over $10 million in the first quarter. While we acknowledge the potential of Builders FirstSource, Inc. (NYSE:BLDR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
We discussed Builders FirstSource, Inc. (NYSE:BLDR) in another article and shared the list of stocks hedge funds are talking about. In the Q1 2024 investor letter, Black Bear Value Partners shared its views on Builders FirstSource, Inc. (NYSE:BLDR). In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
